StatConDigest - Matuguina Integrated Wood Products Vs. CA, GR 98310 (24 Oct.

1996)

Facts:
Matuguina Integrated Wood Products Inc. (MIWPI) filed this action for prohibition, Damages
and Injunction, in order to prevent the respondent Minister of Natural Resources from enforcing
its Order of Execution against it, for liability arising from an alleged encroachment of the
petitioner over the timber concession of respondent DAVENCOR located in Mati, Davao
Oriental. The Court of Appeals in its decision found MIWPI as an alter ego of Milagros
Matuguina and/or Matuguina Logging Enterprises (MLE), to be liable to DAVENCOR for illegal
encroachment.

Issue:
Whether or not a transferee of a forest concession is liable for obligations arising from the
transferor’s illegal encroachment into another forest concessionaire committed prior to the
transfer.

Ruling:
No. Section 61 of P.D. 705 provides that “Unless authorized by the Department Head, no
licensee, lessee, or permittee may transfer, exchange, sell, or convey his license agreement,
license, lease or permit, or any of his rights or interest therein, or any of his assets used in
connection therewith.

The licensee, lessee, or permittee shall be allowed to transfer or convey his license agreement,
license, lease, or permit only if he has not violated any forestry law, rule or regulation; has been
faithfully complying with the terms and conditions of the license agreement, license, lease or
permit; the transferee has all the qualifications and none of the disqualifications to hold a
license agreement, license, lease or permit; there is no evidence that such transfer or
conveyance is being made for purposes of speculation; and the transferee shall assume all the
obligations of the transferor.”

In construing statutes, the terms used therein are generally to be given their ordinary meaning,
that is, such meaning which is ascribed to them when they are commonly used, to the end that
absurdity in the law must be avoided. The term “obligations” as used in the final clause of the
second paragraph of Section 61 of P.D. 705 is construed to mean those obligations incurred by
the transferor in the ordinary course of business.  

It cannot be construed to mean those obligations or liabilities incurred by the transferor as a

result of transgressions of the law, as these are personal obligations of the transferor, and could
not have been included in the term “obligations” absent any modifying provision to that effect.

Page 1 of 1